Correlation Between Nestl SA and Emmi AG

Can any of the company-specific risk be diversified away by investing in both Nestl SA and Emmi AG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nestl SA and Emmi AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nestl SA and Emmi AG, you can compare the effects of market volatilities on Nestl SA and Emmi AG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nestl SA with a short position of Emmi AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and Emmi AG.

Diversification Opportunities for Nestl SA and Emmi AG

0.75

Correlation Coefficient

Nestl SA  Emmi AG

Poor diversification

The 3 months correlation between Nestl and Emmi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Emmi AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emmi AG and Nestl SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nestl SA are associated (or correlated) with Emmi AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emmi AG has no effect on the direction of Nestl SA i.e., Nestl SA and Emmi AG go up and down completely randomly.

Pair Corralation between Nestl SA and Emmi AG

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Emmi AG. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.12 times less risky than Emmi AG. The stock trades about -0.24 of its potential returns per unit of risk. The Emmi AG is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  78,300  in Emmi AG on April 23, 2025 and sell it today you would lose (3,000) from holding Emmi AG or give up 3.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nestl SA  vs.  Emmi AG

Nestl SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nestl SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in August 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Emmi AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emmi AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Emmi AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nestl SA and Emmi AG

The main advantage of trading using opposite Nestl SA and Emmi AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, Emmi AG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Emmi AG will offset losses from the drop in Emmi AG's long position.

The idea behind Nestl SA and Emmi AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.